Melbourne poised for a recovery in 2025, valuer predicts
With the upcoming federal election, the Australian property market is said to be at a “crossroads” in 2025, with one valuer predicting that Melbourne will make a comeback.
Commercial and residential property valuer, Greville Pabst, has released its predictions for the 2025 property market, highlighting Australia’s market being at a juncture marked by each state’s dynamic and diverse nature.
“Each state, territory, and property type marches to its own rhythm, influenced by a mix of local factors like population growth and supply shortages, as well as global drivers such as interest rates and inflation,” Pabst said.
Additionally, the upcoming federal elections, due before 17 May, may slow the property market down until a party is elected, providing more political certainty.
Pabst noted several positive indicators, including population growth, a low unemployment rate, and healthier rental vacancy rates in some regions, that provide a robust foundation for market stability and potential growth in 2025.
Additional positive indicators include higher infrastructure spending to support local economies and demand, clearance rates exceeding 60 per cent to ensure healthy market activity.
Despite the positives, Pabst said challenges will arise in 2025 within some markets, including the holiday home sector which fears oversupply.
Buyers’ confidence may also shatter in 2025 due to low affordability, declining consumer savings, rising energy costs, and increasing food prices impacted by drought conditions.
“But the potential for an interest rate drop could be the catalyst needed to restore confidence,” Pabst said.
Additional challenges include clearance rates below 50 per cent in weaker segments and vacancy rates exceeding 3 per cent in underperforming markets.
While each state will be impacted differently, Pabst predicts that Melbourne will make a comeback and outperform many other cities, forecasting a 5–8 per cent price growth.
“Melbourne is poised for a recovery, with its undervalued market presenting significant opportunities for buyers and investors looking ahead,” Pabst said.
Australia’s most undervalued capital city has seen its performance lag over the past five years but expects a turnaround in 2025, thanks to a rise in clearance rates, stronger investor activity, and an upswing in prices, particularly in finished homes and high-quality apartments.
In the residential market, apartment undersupply is expected to drive price growth, while the luxury market remains resilient.
The industrial sector will continue to experience strong growth, though caution is warranted as supply increases. Meanwhile, the retail sector is set to transform, shifting towards experiential spaces and the growing presence of medical and allied health tenants.
In the office market, suburban offices are expected to perform reasonably well, whereas CBD offices will likely underperform until vacancy rates decrease and the current 35 per cent of rental incentives are absorbed.